Carlsberg second-quarter sales beat estimates raising profit outlook for the year

DENMARK – Carlsberg, the world’s third-largest brewer has recorded improved total sales which rose to US$2.80bn on growing demand for its expensive beers, way above analysts’ expectations in a Reuters poll.

Due to strong overall performance in both the first and second quarter, the brewer has increased its full-year earnings outlook to high-single-digit percentage organic growth in operating profit.

Carlsberg, a global brewer after AB InBev and Heineken expects operating profit to grow by high-single-digits in percentage terms in 2018 compared to the previously forecast growth in mid-single-digits.

“We delivered strong results for the first six months of 2018 with healthy top-line growth, margin improvements across the regions, strong cash flow and continued debt reduction.

We’re pleased to be able to adjust our earnings outlook upwards.

This is a proof point that our SAIL’22 investments support our ambition of sustainable top-line growth,” said Carlsberg CEO Cees ’t Hart.

Carlsberg initiated a major cost-cutting programme in a strategy to revive growth in 2015 and the net benefits from the programme are expected to exceed the previous forecast of US$356.56mn.

High demand was witnessed in China which became Carlsberg’s largest single market in volume terms in July, where it posted 17% growth in organic sales.

The market is reported to have grown 1% attributed to demand for its premium brands like Tuborg, Carlsberg and 1664 Blanc and international premium beer brands sold at two to three times the price of mainstream brands.

Commenting on the results, Sydbank analyst Morten Imsgard said: “There’s more than good weather to these results.

What lifts the earnings is that they’ve sold more expensive beers.

They have really good growth in premium, craft and non-alcoholic beers, which is very positive.”

The group’s price mix, which indicates that the company sold more of its expensive beers, improved by 2% in the first six months of the year and was positive across its major regions: Europe, Russia and Asia.

In Russia, volumes rose 10% in April-June following an 11% decline in the first quarter and this market has proved challenging due to competition from rivals who control about a fifth of sales.

While the company struggled in the Eastern European market, it acquired Russian unit Baltika for US$1.15bn to meet the regional needs of the Group.

Since the market is characterized by weak economy, restrictions on advertising and tax hikes, the company said it remains cautious on Russia where consumer sentiment remains low.

The company recently increased its ownership in the Cambodian brewer, Cambrew Limited (Cambrew) to 75%.

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